BILL NUMBER: SB 943	CHAPTERED  08/31/99

	CHAPTER   274
	FILED WITH SECRETARY OF STATE   AUGUST 31, 1999
	APPROVED BY GOVERNOR   AUGUST 30, 1999
	PASSED THE SENATE   AUGUST 16, 1999
	PASSED THE ASSEMBLY   JULY 15, 1999
	AMENDED IN ASSEMBLY   JULY 8, 1999
	AMENDED IN SENATE   MAY 25, 1999
	AMENDED IN SENATE   APRIL 27, 1999

INTRODUCED BY   Senator Dunn

                        FEBRUARY 25, 1999

   An act to amend Section 5108 of the Revenue and Taxation Code,
relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 943, Dunn.  Property taxation.
   Existing property tax law provides for the levy of an annual ad
valorem tax on personal property, with certain exceptions, based upon
the full value of that property.  Existing property tax law, until
January 1, 2000, permits local agencies, excluding school districts,
to rebate property tax revenue received from economic revitalization
manufacturing property, as defined, for a period of 5 fiscal years
from the date the property was placed in service, commencing with the
1994-95 fiscal year.  Economic revitalization manufacturing property
is defined as tangible personal property meeting certain
requirements.
   The Personal Income Tax Law and the Bank and Corporation Tax Law
allow to qualified taxpayers a manufacturing investment credit
against taxes imposed by those laws in an amount equal to 6% of the
amount paid or incurred during the taxable or income year for
qualified property that is placed in service in this state and, in
general, includes specified types of tangible personal property used
in connection with manufacturing activities.
   This bill would revise the definition of economic revitalization
manufacturing property to also require that it is property described
as "qualified property" for purposes of the manufacturing investment
tax credit under the Personal Income and Bank and Corporation Tax
Laws.  This bill would extend the repeal date until January 1, 2003.

   This bill would require the Legislative Analyst to report to the
Legislature, on or before January 1, 2002, with respect to these
property tax rebate provisions.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 5108 of the Revenue and Taxation Code is
amended to read:
   5108.  (a) For the 1994-95 fiscal year and each fiscal year
thereafter, the governing body of a local agency shall have the
authority, by a majority vote of that governing body, to rebate some
or all of the property tax revenue that the local agency would
receive from economic revitalization manufacturing property for a
period of five fiscal years from the date the property was placed in
service.  For purposes of this section, a redevelopment agency shall
obtain the approval, by a majority vote of the governing bodies of
the city and the county in which the redevelopment agency is located,
prior to having the authority to rebate some or all of that property
tax revenue.
   (b) For purposes of this section:
   (1) "Economic revitalization manufacturing property" means
tangible personal property that meets all of the following
requirements:
   (A) The property is directly involved in the manufacturing process
in this state, and not in a preliminary or subsequent activity, or
one incidental to manufacturing.
   (B) Use of the property will lead to the creation of at least 10
new full-time manufacturing jobs or positions at salary levels of at
least ten dollars ($10) per hour (twenty thousand dollars ($20,000)
per year), and those jobs or positions will continue in existence for
a continuous five-year period.
   (C) A majority of the governing body of the local agency makes a
finding, in its sole discretion, that the property is used in
conjunction with the establishment or expansion of a manufacturing
project or facility within the local agency's jurisdiction, and that
the property meets the requirements of subparagraphs (A) and (B).  In
this connection, a majority of the governing body is hereby
authorized, but not required, to make the finding specified herein,
and thereby authorize the rebate provided pursuant to this section.
   (D) The property is "qualified property" for purposes of the
manufacturing investment credit under subdivision (d) of Sections
17053.49 and 23649.
   (2) "Manufacturing process" means the activity of converting or
conditioning property by changing the form, composition, quality, or
character of the property for ultimate sale at retail or use in the
manufacturing of a product to be ultimately sold at retail.
   (3) "Ten or more new employees" means a net increase by 10 or more
of the total number of employees, as defined in Section 621 of the
Unemployment Insurance Code, employed by the taxpayer in this state.
The increase in the total number of employees employed in this state
shall be determined by subtracting the total number of employees the
taxpayer employed in the previous fiscal year from the total number
of employees the taxpayer employed in the current fiscal year.  The
total number of employees employed in this state shall equal the sum
of both of the following:
   (A) The total number of hours worked by employees in this state
for the taxpayer who are paid an hourly wage divided by the
applicable hours per workyear.
   (B) The total number of months worked by salaried employees in
this state for the taxpayer divided by the applicable months per
workyear.
   (4) "Applicable workyear" means with respect to a worker paid an
hourly wage, 2,000 paid hours and, with respect to a salaried
employee, a total of 12 paid months.  The applicable workyear, in the
case of a manufacturing project or facility that becomes operational
during the year, shall be the amounts in the foregoing sentence
multiplied by a fraction, the numerator of which is the number of
months of the year that the project or facility was operational and
the denominator of which is 12.
   An employee shall be deemed to be employed at a manufacturing
project or facility if he or she utilizes the project or facility as
his or her principal place of business.
   (5) "Local agency" means a city, county, city and county,
redevelopment agency, or special district, excluding any school
district.
   (c) If at any time within five years after granting a rebate
pursuant to this section, the governing body finds that the recipient
taxpayer has not complied with the conditions of paragraph (1) of
subdivision (b), the governing body may recapture from that taxpayer
all or any portion of the amount rebated.
   (d) This section shall apply only to property that is placed in
service on or after January 1, 1994.
   (e) (1) On or before January 1, 2002, the Legislative Analyst
shall prepare a report for the Legislature, which shall include, but
not be limited to, the following information with respect to this
section:
   (A) A list of local agencies that have utilized the tax rebate
provisions.
   (B) The dollars expended by each agency utilizing the tax rebate
provisions.
   (C) The number of jobs created by each of the local agencies
utilizing the tax rebate provisions.
   (D) A reasoned estimate of the number of jobs created that, but
for these provisions, would have been located outside the state.
   (E) A reasoned estimate of the number of jobs that, but for these
provisions, would have been located in another jurisdiction within
the state.
   (2) By granting this tax rebate, the granting agency agrees to
cooperate fully with the Legislative Analyst.
   (3) Beginning in 2000, each participating agency shall provide the
Legislative Analyst annually with a complete set of data for the
program, including all of the information required in paragraph (1).

   (4) The final report by the Legislative Analyst, provided pursuant
to paragraph (1), shall include an analysis of the cost per job of
jobs created pursuant to this section, a comparison of this program
to other economic development tools, and a recommendation as to
whether this program should be continued in its present form,
restructured, or eliminated.
   (f) A local agency may enter into an agreement with a taxpayer to
implement this section and the agreement shall be valid
notwithstanding the subsequent repeal of this section.
   (g) Nothing in this section shall be deemed to eliminate or reduce
the obligation of a redevelopment agency to comply with Section
33334.2, 33334.6, 33607.5, or 33607.7 of the Health and Safety Code.

   (h) This section shall remain in effect only until January 1,
2003, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2003, deletes or extends
that date.
